Market Snapshot: U.S. stocks sacked - 09-30-98

KevinN. Marder

NEW YORK (CBS.MW) -- U.S. stocks were slammed for beefy losses Wednesday as investors, voicing extreme displeasure with Tuesday's minimal interest-rate cut by the Federal Reserve, dumped holdings across a broad swath.

Tuesday, the Fed trimmed the federal funds rate to 5.25 percent from 5.50 percent to stem the risk of the U.S. economy lapsing into the recessionary abyss engulfing many other nations.

But the size of the central bank's move disturbed many, who had felt that a drop of 50 basis points, or one-half of 1 percent, was in order. The funds rate is what banks charge each other for overnight loans, and is the Fed's primary tool with which to influence economic growth.

Wednesday's action in financial markets was punctuated by incessant speculation as to which bank or brokerage house might be the next to reveal its exposure to losses suffered by hedge funds. This, in the wake of last week's rescue of Long-Term Capital Management L.P. from the brink of collapse by a group of banks and brokerages.

Bankers Trust (BT)
BT, -0.44%
was the name bandied about the most Wednesday in connection with hedge fund exposure, its stock backpedaling 1 13/16 to 59. The company said virtually all of its loans to the funds are collateralized by cash or Treasury securities.

Meanwhile, bond prices staged a gigantic leap Wednesday, responding to the U.S. stock selloff, hedge fund buying, and worries of further bank and brokerage exposure to hedge fund losses.

"The paranoia about various banks and brokerage firms having difficulties associated with hedge fund losses was at work in today's bond rally," said Tony Crescenzi, chief bond market strategist at Miller Tabak Hirsch.

In the the 30-year Treasury bolted 2 28/32 points, to yield
TYX, -0.03%
4.958 percent, a level not seen since the government began regularly issuing the maturity in 1977.

"The Nikkei...is sending the message to the world that [Japan's] problems have not turned the corner yet," Don Hays, director of investment strategy at Wheat First Union, said in a research note. "This morning the new low of 13,400 is twisting the noose even harder. Every downtick in that market increases the intense financial crisis in Japan.

"The Japanese market is crying for help from the Federal Reserve's of the world, and Tuesday's ultra-timid approach didn't come close to cutting it," Hays said. "So Japan and the other markets of the world are going to shake the Fed's tree hard to see how strong their grip of conviction really is."

Stateside, sectors with a hefty exposure to the twists and turns of the U.S. economy were shelled, transportation
DJT, -0.35%
and retail
RLX, +0.00%
, in particular.

Technology issues, stalwart performers since the Sept. 1 low in major averages, were unable to dodge the liquidation. Here, computer networkers fared the worst. See full story.

In specific issues, RJR Nabisco Holdings (RN)
RN, -1.29%
declined 1 9/16 to 25 3/16. It steered analysts to expect third-quarter results to be about 20 percent to 23 percent less than consensus expectations. The company cited poor business conditions in Russia and other Eastern European nations as the main reason for the grim forecast. See full story.

Unocal (UCL)
UCL, +0.00%
sagged 1/2 to 36 1/4. The integrated petroleum concern warned analysts that its third-quarter profits would come in below 10 cents a share due to lower natural gas prices and higher expenses associated with production. Wall Street had looked for 20 cents. See full story.

SM&A (WINS)
WINS, +0.01%
crumbled 7 5/8 to 17 1/4 after the provider of systems engineering, program integration, and proposal management services said it will undercut Street projections with its third-quarter results. Most analysts had pegged the figure at 17 cents a share. SM&A pointed to delays on key projects as hampering revenues to the tune of about $3.5 million.

American Airlines(AMR)
AMR, -3.26%
dropped 3 5/8 to 55 7/16 after the company said it plans to sell three units and focus on its core business.

Telecommunications equipment provider Northern Telecom (NT)
NT
fell 3 5/8 to 32 1/4. Although the company told analysts Tuesday that it sees third-quarter earnings in line with current estimates, a reference to weakness in some areas of Nortel's business was interpreted by some as a profit warning, analysts said.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.